Flexible Downsizing—A Matter of Global Stability, Not Just an Interesting "Option"

When I started blogging about flexibility as an alternative to layoffs, my primary focus was to encourage companies to "consider" how reduced schedules, job sharing, shifting hours, sabbaticals/furloughs, and project-based employment could lower labor costs while retaining valuable talent and minimizing job cuts.

According to Schwartz, the rate of job cuts domestically and internationally is accelerating to levels not seen since the Depression, "Worldwide job losses from the recession that started in the United States in December, 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs." France’s employment minister, Laurent Wauquiez, explained, "This is the worst we’ve had since 1929. The thing that is new is that it is global, and we are always talking about that. It is in every country, and it makes the whole difference." The International Monetary Fund "expects that by the end of the year, global economic growth will reach its lowest point since the Depression."

And like the 1930s, Ferguson points out, "…most countries are looking inward, grappling with the domestic consequences of the economic crisis and paying little attention to the wider world crisis. This is true even of the United States, which is now so preoccupied with its own economic problems that countering global upheaval looks like an expensive luxury."

But if Schwartz is correct, our domestic preoccupation could cause us to overlook social challenges already emerging in other countries as a result of the global economic downturn, "Millions of migrant workers in mainland China are searching for jobs but finding that factories are shutting down. Though not as large as disturbances in Greece, or the Baltics, there have been dozens of protests at individual factories in China and Indonesia where workers were laid off with little or no notice."

And the national security implications from the international unrest were serious enough for the new U.S. director of national intelligence, Dennis Blair to tell Congress, "that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism."

Interestingly, just as the world sees the U.S. as a source of the economic problems, they are now following our lead in resorting to "layoffs" as a response. As Schwartz notes, "While the number of jobs in the United States has been falling since the end of 2007, the pace of layoffs in Europe, Asia and the developing world has caught up only recently as companies that resisted deep cuts in the past follow the lead of their American counterparts." Following our "lead" with layoffs? Oh no.

Obviously, a strong, research-based business case in favor of flexible downsizing (here and here) hasn’t gotten enough U.S. companies to look beyond layoffs for many of the reasons I’ve noted in past posts (here and here). Maybe the need for global stability finally will.

It’s in America’s best interest, both economically and from a national security perspective, to take the lead and chart a new more flexible response to the downturn. Leaders can use strategic flexibility to manage their business through the crisis while keeping as many people as possible employed in some way. Again, research shows that layoffs often don’t achieve their intended bottom-line objectives. Not to mention the body blow to consumer confidence which economists believe will be one of the key factors in a recovery. Falling back on these outdated, unimaginative, all-or-nothing, layoff-based management practices could ultimately cause harm in areas that aren’t hitting the radar screen of leaders.

As South Korea’s former ambassador to Washington says in Thomas Friedman’s New York Times’ column today, "There is no one who can replace America. Without American leadership, there is no leadership. That puts a tremendous burden on the American people to do something positive." This downturn isn’t like other recent recessions. It’s happening rapidly. It’s global. And its’ potential economic and security impact requires bold, innovative, creative approaches that go beyond old-school thinking. So we have to ask ourselves one more time—who’s going to take the lead and show the world another more flexible way to manage through this global economic crisis? We, the U.S., need to raise our hands and finally take action.

(Update: Since posting, Watson Wyatt released survey results showing companies expect their rate of layoffs to decline. Let's hope this prediction holds up inspite of economic data that continues weaken such as "initial jobless claims soared to 667,000 in the week of February 21 from 631,000 a week earlier. That was well above the 625,000 forecast and the highest going all the way back to 1982.")

What do you think? Is finding flexible alternatives to layoffs still an interesting "option" to "consider" or is it now a economic imperative for global stability?

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4Comments

I think that hard times will accelerate a Digital Age makeover in many U.S. firms. Today, flexibility by being open to change, survivabilty through building market share and holding on to those who hold their company's core competencies are key success factors.

A growing number of companies are encouraging workers to work from home. As the recession spirals downward, companies are planning to save money on real estate costs while keeping key employees and maintaining the firm's market presence.

Many employees are agreeing to part-time employment or becoming an as needed contract free agent or moving to a 100% commission only basis.

I second Celia's acknowledgment of your efforts Cali to keep the issue of layoffs front and center. Mass layoffs lack the innovation and creativity necessary for the new face of business and I also wonder what is behind adhering to such outdated and inefficient approaches to more difficult economic times.

As I think about these executives making such decisions, I find it interesting to note that there aren't any women asking for billions of dollars in bailout money. I just wrote an article regarding Duke's Fuqua School of Business Executive Leadership Survey which included responses from 205 executives from both the public and private sectors. It highlights what executives view as the Top 5 Leadership Challenges and Leadership Skills Rated as Most Important. When reviewing the list of skills, it was clear that these skills and attributes are those that come naturally to woman who frustratingly, are sorely underrepresented at the executive level and in the board room.

In Catalyst studies, it has been shown how women's presence in these top leadership roles can significantly improve firm performance. I'm confident that this capacity to positively impact an organization's financial performance would be reflected in an updating of such outdated and shortsighted practices of mass layoffs.

Bringing up the global impact of layoffs and the potential for a somewhat more positive global impact by downsizing through flexibility is really important.

My sense is that most corporate executives are still looking at decision criteria that are overwhelmingly short sighted and (dare I add) self-centered. I've argued that mass layoffs might well be unpatriotic (at http://bit.ly/aqkU1), since each organization's decision to downside contributes to an overall, interlocking pattern of diminished business activity. But the national economic situation is only one part of the big picture surrounding downsizing decisions.

An insightful statement of yours -- "Falling back on these outdated, unimaginative, all-or-nothing, layoff-based management practices could ultimately cause harm in areas that aren’t hitting the radar screen of leaders" -- is something that we all should be talking more about.

Thanks for making us aware of the bigger picture and the global case against mass layoffs.